Commercial purpose loan to purchase and convert/improve church to a duplex for investment property. Loan will be secured with existing rental properties (1-4 family). Not temporary.

My notes and training all say, what will the building be once the loan proceeds are applied? But I cannot find reference to that in the regulation. So my understanding would be HMDA reportable as a purchase.

Can anyone confirm my understanding is correct? Thank you.

I agree with your understanding. Comment #3 to §1003.2(f) supports this in saying what is not a dwelling. It excludes "homes converted to daycare facilities or professional offices". If a home converted to a daycare is not a dwelling; it makes sense that a church being converted to a duplex is a dwelling:

3. Exclusions. Recreational vehicles, including boats, campers, travel trailers, and park model recreational vehicles, are not considered dwellings for purposes of § 1003.2(f), regardless of whether they are used as residences. Houseboats, floating homes, and mobile homes constructed before June 15, 1976, are also excluded, regardless of whether they are used as residences. Also excluded are transitory residences such as hotels, hospitals, college dormitories, and recreational vehicle parks, and structures originally designed as dwellings but used exclusively for commercial purposes, such as homes converted to daycare facilities or professional offices.

I agree with Diane, and would definitely report.

Thank you both very much!

Hi Diane,

I am bringing this question back up again due to the clarification from early 2021.

I believe BCC wrote the CFPB and the CFPB indicated it's what the structure is currently, not what it will be converted into.

The reason I ask, I have a similar scenario again. Medical office being converted into a duplex for rentals (commercial purpose). Previously, I would have reported as the funds will convert this to a dwelling. But at time of loan closure, it was technically still a medical office.

Thoughts? Based on their clarification, this would not be reportable now?

Thank you

Wasn't the guidance provided such that "and structures originally designed as dwellings but used exclusively for commercial purposes," insinuated that the conversion had already happened and that is why it was excluded? Meaning that you look at what is is at closing as to reportability? I saw that and I believe it was David D that posted it but I wasn't finding it.

If so, based on the text in the OSC, I can see the CFPB coming with that ruling. I personally think it's more meaningful to look at the usage it will have but one must ask how long that could take or if it will actually happen. What you know now is reportable, not what's projected.

If my recollection is correct it's a CML bldg and not reportable, but I've slept since I read that new guidance. Again, it is justifiable, just not forward thinking and shorts the housing industry stats.

Sept 28, 2020, nearly a year ago. https://www.bankersonline.com/forum...-that-will-be-torn-down-hmda#Post2243361

Thank you Andy, that was my thinking as well that you look at what it is at closing to determine reportability.

I agree. The thread Andy shared is messy, but has a good discussion of the "bright line" test on looking at what the structure is at the time of closing.

To further support the "bright line" test, CFPB HMDA FAQ 1 in the "Construction and Construction/Permanent Transactions" section says this:

"1. My financial institution originated a loan to a builder to construct a dwelling for sale. The proceeds of the loan will be used to buy a house, demolish it, and rebuild a house for sale immediately after closing. Is this transaction excluded from HMDA reporting?

No. In the scenario described, part of the loan will be used for purchasing a dwelling in addition to constructing a dwelling for sale. Therefore, the transaction described above is not excluded from HMDA and should be reported as a home purchase loan. A construction-only loan or line of credit is considered temporary financing and excluded from collection and reporting requirements under comment 3(c)(3)-2 if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. Comment 3(c)(3)-2 to Regulation C, 12 CFR § 1003.3(c)(3). Updated Nov. 14, 2018

Furthermore, Footnote 82 in the 2017 HMDA Final Rule also supports the "bright line" test:

""Examples of commercial-purpose loans that currently are reported are: (1) A loan to an entity to purchase or improve an apartment building (or to refinance a loan secured thereby); and (2) a loan to an individual to purchase or improve a single-family home to be used either as a professional office or as a rental property (or to refinance a loan secured thereby)."

Thank you Adam, I appreciate everyone's help!